SME Loan Guarantee Scheme

What should be done to submit a default claim?

Yes. A PLI may release the loan to the Borrower once the AIP is issued. It is not necessary to wait for the formal guarantee before the Borrower is allowed to draw down the loan.

PLIs are however reminded that the draw-down date of the loan (i.e. the starting date of the facility) and the date of the facility letter should not be earlier than the date of the AIP.

The Deeds for SGS have stipulated that a facility shall be denominated in Hong Kong dollars. While some PLIs may grant a facility in foreign currencies, the loan amounts should be stated in (or converted into) HK dollar in the guarantee under SGS.

PLIs should provide accurate information to TID at the time of returning the Confirmation of Particulars of Business Installations and Equipment / Working Capital Loan Guarantee (TID602 or TID642). TID will consider requests for changes after issue of guarantee on a case-by-case basis. PLIs will be required to provide supporting documents and TID reserves the right to approve/ reject such requests.

For changes such as loan amount, risk sharing ratio, guarantee limit and guarantee period, a new guarantee for the facility concerned will be issued if the requests are accepted. PLIs should however note that any request for increase in loan amount which will lead to an increase in the guarantee amount and extension of the guarantee period will not normally be accepted. Regarding other changes such as designated bank account number and interest rate, TID will only acknowledge receipt of the written notice but will not issue a new guarantee.

Please note that changes after the loan is drawn down will not be accepted.

The Applicant is required to provide information regarding its form and type of business in Part A of the Application Form. The Applicant should only tick one category of business. If the Borrower is engaged in more than one type of business, only the major type of business should be chosen.

The number of employees in Hong Kong should include individual proprietors, partners and shareholders actively engaged in the work of the business; and salaried employees of the business, including full-time or part-time salaried personnel directly paid by the business, both permanent and temporary. The number of employees in Hong Kong should not be less than one.

The PLI should inform TID of any changes by providing the correct information on TID602 and TID603i or TID642 and TID643. If the changes involve an upward amendment of the loan amount and guarantee period before the loan is drawn down, full justifications in writing should be provided. TID will consider the request on a case-by-case basis. If accepted, the formal Guarantee to be issued will have the changes incorporated. In case the PLI could not submit TID602/TID642 and TID603i/TID643 due to, for example, the draw-down date is not yet fixed, only an acknowledge letter will be issued. The formal Guarantee will be issued upon receipt of TID602/TID642 and TID603i/TID643. Please note that changes after the loan is drawn down will not be accepted.

If there are changes after the issue of formal Guarantee, please refer to question 3.

The Deeds* for the SME Loan Guarantee Scheme have clearly spelt out the Lender's obligations including the need to obtain audited accounts/financial statements to facilitate credit assessment. PLIs should exercise due diligence and care in considering the type of documents, in addition to those specified in the Deeds*, that are required for the purpose of assessing the creditworthiness of the Borrower before granting a facility.

It is TID's normal practice to request a PLI, after a default claim is lodged, to provide relevant documents concerning credit assessment submitted by the Borrower to the PLI when the application was made. If the PLI considers that, despite the absence of certain documents during the application stage, there are still sufficient grounds to support the granting of the facility, the PLI should provide justifications to explain the rationale behind its decision during the claim stage. We will consider them on a case-by-case basis. For details, please refer to the "General guideline on submission of default claim" promulgated by TID.

* The Deeds herein refers to the original Deeds as amended by the Supplemental Deeds.

A letter will be issued to PLIs, together with the Notification of Result of Application for Business Installations and Equipment / Working Capital Loan Guarantee and a questionnaire for onward transmission to the Borrower. The Borrower should complete the questionnaire (either the English or Chinese version) and return to TID direct. The Borrower may send in the questionnaire by fax or by post.

It is not necessary for PLIs to provide a copy of the facility letters in returning the Confirmation of Particulars and Acceptance of Conditions in all cases. Under certain circumstances, we may request the PLI to provide a copy of the facility letter to facilitate us in ascertaining whether the facility granted by the PLI requires approval by the Government (e.g. in case the PLI issues the facility letter before obtaining the Notification of Result of Application for Business Installations and Equipment / Working Capital Loan Guarantee from TID). PLIs only need to submit the facility letters upon request by TID.

If a Borrower fails to repay on a repayment date and the overdue remains outstanding 61 days after the relevant repayment date, the PLI concerned may submit a default claim to TID using the payment request form, which can be downloaded from TID's website. Relevant supporting documents (as set out in the "Other Information" section of the payment request form) should also be provided together. TID may require the PLI to provide additional documents or information in the course of processing the default claim. For details, please refer to the "General guideline on submission of default claim" promulgated by TID.

Each enterprise fulfilling the eligibility criteria of the SGS may submit separate applications. For cases involving related companies, TID would need to obtain additional information from the PLIs to ascertain that: (1) the business nature and/or markets/clienteles of the companies are different and the owners are not trying to use different business registrations to circumvent the loan guarantee ceiling; and (2) the PLIs concerned are aware of and have taken into account the overall risks relating to all the loans obtained by the same owner(s).

Please note that this kind of cases would normally take longer time to process. To expedite the process, PLIs that are submitting cases involving related companies should provide the information mentioned above to TID as soon as possible.

For most cases, TID will obtain the consent from the applicants for disclosing company-specific information, including loan amounts and the PLIs involved, to other PLIs if the applications involve more than one PLI. We will then request the relevant PLI to provide the additional information mentioned in question 11. Based on the information provided by the PLIs, TID will consider the applications on a case-by-case basis.

If the PLI is aware that the company(ies) held by the borrower's common shareholders have submitted other applications / been granted guarantee under the SGS, the PLI should provide the relevant information to TID by completing an additional form (TID 608) - "Additional Information on Related Company(ies)", which is downloadable from the PLI Corner. This should help to speed up the process for cases involving related companies.

Yes. PLIs are required to identify which is/are the related company(ies) and to obtain consent from them for disclosure of application details to TID. Related companies normally refer to common shareholders whose equity interest is 30% or more in these companies. If there are common corporate shareholders, the PLI should provide further information of the natural persons holding or the ultimate shareholders of the company(ies) in question.

Yes. If TID finds that the borrower's related company(ies) have submitted other SGS applications to TID, a deferment notice will be issued informing the PLI that the borrower has related company(ies). The procedure outlined in question 12 will be followed. To speed up the process, the PLI could also complete the TID 608 after obtaining consent from the relevant parties. Because of privacy concerns, TID will not disclose details of the related companies and the applications involved. PLIs are required to obtain such information on their own.

Yes. As indicated on the form, PLIs should provide TID with audited accounts / financial statements (depending on the form of business) of the borrower as well as the related company(ies), irrespective of whether the related applications have been approved previously. If the documents cannot illustrate clearly the principal activities of the related companies (or the difference of their principal activities), the PLI should submit additional documents such as invoices/purchasing orders, etc, to support their case.

The Government allows a nine-month period from the end of the Borrower's business's financial year for the Borrower to prepare the relevant audited accounts/financial statements. If the loan application is made within the above grace period, it will be acceptable for the Borrower to show only the preceding accounts. However, if the required audited accounts/financial statements represent the first accounts of the Borrower's business, they are expected to be available 18 months after the date of establishment of the Borrower's business.

TID will rely on the professional judgment of the PLIs in determining the factors to be considered when assessing the creditworthiness, repayment ability and business prospects of the Borrower before granting the loan. In practice, during the default claim stage, it is up to the PLI to explain their case to satisfy TID that it has exercised professional judgment and due diligence in the loan approval process. One of the major factors that TID will consider is whether such practice is consistent with the prevailing practice of the PLI in respect of loans granted outside the SGS (i.e. loans where the PLI will have to shoulder 100% of the default risk). The PLI should ensure that the whole deliberation process, including the factors considered, the deliberations and the loan approval process should be well-documented in their credit assessment report or other relevant documents.

Yes, PLIs may write to TID to apply for an upward adjustment of the guarantee exposure ceiling. In making the application, the PLI should provide detailed justifications, such as the current utilization rate, amount of loans being processed by the PLI, etc. to TID for consideration. TID will consider such request on a case-by-case basis.

No. The requirement of "substantive business operation" is an existing condition required under the SGS. The requirement has been enshrined in the Deed since the commencement of the SGS and underlined in the Application Form. The intention of revising the Deed is to make the requirement more expressly stipulated in the Deed.

We have also promulgated a "Guideline on the requirement of substantive business operation" for reference.

Normally the PLIs will be required to provide the supporting information and documentary proof when a default claim is submitted, but TID may also request for such information during the application stage if considered necessary. As regards the kind of information required, it depends on the circumstances of individual cases. For example, if an enterprise's substantive business operation in Hong Kong can be easily identified, it would have less need to provide documentary proof.

No. Given the diversity of business nature of individual enterprises, we have not set any minimum capital requirement in a quantitative manner. This condition is only one of the aspects in considering whether an enterprise has substantive business operation in Hong Kong and reference will also be made to other relevant aspects.

No. The intention of requesting for applicant's client information is to make cross-reference to its business operation, especially its set-up in Hong Kong since what and how enterprises produce/ operate are usually related to the needs of their clients. The type of information required can be general or specific. The requirement is less about the number and percentage of clients / customers in Hong Kong, but more on whether the service required by clients is performed or partly performed in Hong Kong.

As the Guideline is mainly for reference and is not meant to be exhaustive, there would be updates from time to time to include new or additional information. Yet the basic requirement will remain the same, i.e. the borrowing enterprise must have substantive business operation in Hong Kong. We will inform all PLIs in writing of any update/changes.

PLIs should use the updated Application Forms TID601 or 641 (Revised in February 2010) for new applications after the Supplemental Deeds are executed. As a transitional arrangement, a PLI may provide additional information clearly in Part B of the Application Forms (Revised in November 2008) (Statement by Lender) to indicate the dates of signing the original Deed and the Supplemental Deed. Specifically, the PLIs should insert "and the Supplemental Deed dated dd/mm/yy" after "the Deed dated ____________ (dd/mm/yy)". To avoid deferments, please be reminded to apply an amendment chop next to the insertion.

The Supplemental Deed will become effective when all the contracting parties have signed and executed the Deed. In this connection, the effective date for individual PLIs may vary. Procedurally, TID will confirm with each PLI the effective date once all the formality is completed.